Technology | Service & Supply | Oilfield Services | Drilling Activity
Pacific Drilling Completing Three New Drillships
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Pacific Drilling S.A. has announced revenue of $225.6 million for the three months ended March 31, 2014, as compared to revenue of $200.5 million for fourth-quarter 2013 and $175.0 million for first-quarter 2013.
Net income for first-quarter 2014 was $22.2 million or $0.10 per diluted share. Net income for first-quarter 2013 was $15.1 million or $0.07 per diluted share.
CEO Chris Beckett said: "We delivered our fifth consecutive quarter of increasing revenue. Cash flow from operations reached a new high, and EBITDA exceeded $100 million for the first time. However, we have room to improve. During the first quarter, the challenges of starting operations with the Pacific Khamsin were greater than we anticipated and resulted in a reduction to revenue and EBITDA."
Regarding the market for ultra-deepwater drillships, Beckett added: "During the first quarter, we saw an increase in bidding activity compared to the previous quarter; but this activity has yet to translate into signed contracts. Although there are very few modern, high-specification ultra-deepwater rigs available, we expect 2014 to continue to be a challenging market. There are many older fifth-generation rigs, which we expect will provide lower-priced competition on some projects.
In an effort to minimize the impact of these lower-specification units on our dayrates, we are focusing on opportunities that require the newest and highest-specification rigs. We are pleased to have extended Pacific Scirocco through 2017, our discussions to extend Pacific Mistral are ongoing, and we remain confident that we will contract Pacific Meltem prior to delivery."
First-Quarter 2014 Operational and Financial Commentary
Contract drilling revenue for first-quarter 2014 was $225.6 million, which included $28.0 million of deferred revenue amortization, compared to contract drilling revenue of $200.5 million for fourth-quarter 2013, which included $20.2 million of deferred revenue amortization.
During the three months ended March 31, 2014, our operating fleet of five drillships achieved average revenue efficiency(b) of 82.7 percent, compared to 95.6 percent in the prior quarter. The decrease in revenue efficiency resulted primarily from lower-than-expected revenue efficiency during the Pacific Khamsin shakedown, reducing our revenue efficiency by more than 10 percent. Revenue efficiency for the quarter was also negatively impacted when Pacific Scirocco underwent a required export and reimport in Nigeria.
Contract drilling expenses for first-quarter 2014 were $111.0 million, compared to $90.6 million for fourth-quarter 2014. Contract drilling expenses for first-quarter 2014 included $13.2 million in amortization of deferred costs, $6.7 million in reimbursable expenses, and $8.4 million in shore-based and other support costs. Amortization of deferred costs increased over the prior quarter due to a full quarter of cost recognition for Pacific Khamsin. Shore-based and support costs increased by approximately $1.1 million compared to fourth-quarter 2013 as a result of incremental costs to support a third vessel operating in Nigeria.
Direct rig-related daily operating expenses, excluding reimbursable costs, averaged $183,800 in first-quarter 2014, in line with our guidance for 2014, compared to $176,200 for fourth-quarter 2013. The increase in direct rig-related daily operating expenses was primarily due to annual compensation increases instituted on January 1 for our operations personnel.
General and administrative expenses for first-quarter 2014 were $12.5 million, compared to $13.0 million for fourth-quarter 2013.
Liquidity and Capital Expenditures
During the first-quarter, cash flow from operations reached $122.8 million as a result of strong customer collections. Our cash balances increased to $236.5 million as of March 31, 2014, and our total outstanding debt was $2.4 billion. We continue to have $1.1 billion of undrawn capacity under our existing credit facilities.
During first-quarter 2014, our capital expenditures were $88.8 million, of which $58.9 million related to construction of our newbuild drillships and $15.1 million was paid for capitalized interest. The remaining expenditures primarily relate to fleet spares and contractually required upgrades on our operating rigs that are partially or fully reimbursed by our customers.
New Drillships
We estimate the remaining capital expenditures required to complete construction of our three newbuild drillships and develop spare blowout preventer and riser capacity to be approximately $1.4 billion, excluding capitalized interest and client-reimbursed asset upgrades. We expect to cover these capital expenditures with a combination of our existing cash balances, future operating cash flows, undrawn capacity on our existing credit facilities and additional financing.
Updates to 2014 Guidance
We reiterate our guidance on revenue efficiency provided with our fleet status report on May 1, 2014. The average revenue efficiency ranges of 91-95 percent for second-quarter 2014 and 89-93 percent for full-year 2014 include our expectations for unplanned downtime as well as planned events mainly related to export and reimport of rigs in Nigeria, completed in first-quarter 2014. The guidance is also reflective of required inspections across the fleet and the initial stages of the shakedown process for the Pacific Khamsin, Pacific Sharav and Pacific Meltem, during which we expect their revenue efficiency to lag current levels of our first four operating rigs.
We reiterate our other guidance provided with our full year 2013 results.